Costa Rican Oil Refinery in long battle with tax authorities

August 19th, 2014 (InsideCostaRica.com) The Costa Rican Oil Refinery (RECOPE) has been charged more than $180 million (¢96.6 billion) in penalties and interest by the Treasury as the result of tax audits over the last five years, according to a report by the daily La Nacion.

The Directorate General of Taxation (DGT) has audited RECOPE three times over the past five years, finding on each occasion that RECOPE had under-reported its income and was delinquent in its tax obligations.

The most recent audit was for the tax year 2010-2011. For that year, auditors determined that RECOPE owed ¢7 billion ($13.2 million), despite the fact RECOPE reported zero income.

The year previous, tax authorities demanded payment of ¢60 billion ($113.2 million) after conducting audits of RECOPE’s tax years between 2004 and 2008.

So far this year, RECOPE has reported losses of ¢10 billion ($18.8 million) between January and June.

Claudio Ansorena, general manager of the State-owned company, said tax auditors themselves are principally to blame for the situation. RECOPE believes that it is exempt from income tax as a State-owned company – a view not shared by the Treasury.

RECOPE and tax authorities have faced off over the issue for years, and RECOPE blames many of its financial woes on tax authorities.

Tax authorities believe that “excess” revenue generated by RECOPE – which would traditionally be defined as “income” or “profit” for a private enterprise – is subject to income tax. RECOPE, for its part, argues that such revenues are not profit, as they are held in reserve for future investments in infrastructure and other future needs.

“RECOPE is in a delicate situation. If we pay [taxes], we have to find the money, either by taking on debt or by dropping plans for future investments,” Ansorena said.

“If RECOPE persists with the same behavior (not paying taxes), we will continue to conduct audits to correct them,” said Carlos Vargas, director of Taxation.

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The top 100 People of Costa Rica Departments should be fired with no benefits, ICE, AWA, and the rest, no elected official should receive any benefits.

michaelwink

Sounds like a sweet precedent they could set here, as basically every business could argue their profit one year is being held in reserve for future investment.

Ken Morris

Sounds like something the courts need to resolve. I can see the matter either way, and it probably doesn’t matter which way it is resolved since tax payments would likely just be passed along to the consumer in higher prices, but there does apparently need to be agreement as to what the law really requires.

I guess I’d prefer that RECOPE be taxed, mainly because subsidizing oil strikes me as precisely the wrong thing to do from both an environmental and quality of life standpoint, but this issue doesn’t sound like a matter of opinion to me. I think the question is what the law actually requires.

turbooperator

While it doesn’t seem to make much sense that the government would tax itself (asi es Costa Rica) , RECOPE’s own Management Rule #9 (found on it website) says that it (RECOPE) is subject to, and will pay taxes in accordance with the law.

Lav

If they want to be classified as state owned, maybe they should have state approved salaries… which of course should be approved by the citizens of Costa Rica.